How Republicans Are Ensuring Companies Put ‘America First’
Republican leadership in Congress is expected to roll out its plan to overhaul the U.S. tax code before the July 4 recess, and the lawmakers are currently trying to conjure up a way to hinder corporations from participating in tax avoidance schemes overseas.
The U.S. has the third highest corporate income tax rate in top 35 industrialized nations and as a result pushes businesses, jobs, and tax revenue out of the nation. America’s corporate tax rate is “16.4 percentage points higher than the worldwide average of 22.5 percent and a little more than 9 percentage points higher than the worldwide GDP-weighted average of 29.5 percent,” according to the Tax Foundation.
Staffers in Congress and the Trump administration are currently working on ways to address profit-shifting to foreign nations, Reuters reports. One of the chief complaints of Republican lawmakers is that far too often companies shift profits overseas that could be used to reinvest in American workers, businesses and infrastructure.
Some of the lack of reinvestment, on the part of both corporations and the federal government, is already coming to bear in parts of middle America, the South and the rust belt. Rural communities, like those in rust belt, now rank the worst out of all major population groups in the U.S. Rural areas have the highest rates of backbreaking poverty, the fewest college graduates, the highest rates of teenage pregnancy and the highest rates of unemployed males over the age of 16. (RELATED: Intellectual Crisis? Clinton Voters Are Not As Smart As They Thought)
If Republican lawmakers fail to include measures to prevent profit-shifting in their tax reform package, experts warn that corporate flight overseas will only continue to get worse. For example, President Donald Trump and Republican leadership are pushing to end U.S. taxes on foreign earnings, which could allow U.S. companies to end their domestic tax bills entirely without restrictions.
Corporate tax avoidance costs the U.S. federal government between $100 and nearly $500 billion per year. On the low end, that is nearly 33 percent of projected annual corporate tax revenues. U.S. companies hold nearly $3 trillion in assets and capital overseas.
Democrats on the Senate Committee on Finance asked Secretary of the Treasury Steve Mnuchin in early June to keep regulations enacted under the Obama administration to combat corporate tax inversions.
The most effective, yet least popular, proposal floated on the Republican side to combat corporate profit sharing is the border adjustment tax (BAT).
To achieve President Donald Trump’s ambitious tax reform proposal, Speaker of the House Paul Ryan has pushed for a BAT that would levy a 20 percent tax on imports. The tax would allow U.S. companies to deduct the cost of goods made in America but not ones made in foreign countries. It would reportedly raise over $1 trillion in federal revenue over the next decade, a much-needed sum to finance the government while simultaneously slashing business and corporate tax rates by 15 percent. (RELATED: Trump Unveils ‘Biggest Tax Cut’ In U.S. History)
Other proposals include instituting a minimum tax on profits made in tax havens and other measures to help stop companies from shifting to low-tax countries where they do little business.
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